ORDER

1. These are appeals by certificate. The judgment under appeal was a delivered by a Division Bench of the High Court at Madras on 15-12-1977.

2. The respondents premises were inspected by an officer of the appellants, the Employees State Insurance Corporation, on 30-5-1966 and he found that on 9-4-1966 the respondents had employed 20 workmen or more. Thereupon the respondents were served with a notice which required them to contribute under the provisions of the Employees State Insurance Act, 1948, (the Act) for the period 9-4-1966 till 8- 4-1967. This was taken to the court under the Act. It was contended on behalf of the respondents that they had not employed 20 persons. They also contended that the period for which the demand was issued was erroneously calculated. The ESI court allowed the demand for only a very small sum, whereupon the matter was taken to the High Court. A learned Single Judge held that the demand could validly be made only for the period 9-4-1966 to 8-10-1966. The autborities under the Act thereupon appealed to the Division Bench. On behalf of the appellants it was contended that the Act would apply to the respondents factory for the full period of 12 months commencing on 9-4-1966 and ending on 8-4-1967 and reliance was placed upon the definition of "factory" in Section 2(12) and the provisions of Section 39. Having regard to the phraseology thereof, the Division Bench came to the conclusion that the respondents having employed 20 or more persons on 9-4-1966, which was the date falling within the period 1-12-1965 to 30-11-1966, the factory would be covered for that period of one year. This was upon the basis that the Act had come into force on 1-12-1958. The claim having been made for the period 9-4-1966 to 8-12-1967, the Division Bench held that there could be no liability for the period subsequent to 30-11-1966.

3. It has been submitted to us that there is no judgment of this Court which decides the question. Reference has been made to Section 1(4) of the Act, by reason of which the Act shall apply, in the first instance, to all factories."Factory" is defined in Section 2(12) (a) thus :

"2. (12) factory means any premises including the precincts thereof (a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on, " [Clause (b) is not relevant for our purpose.

4. Section 38 requires that all employees in a factory or establishment to which the Act applies shall be insured in the manner provided by it. Section 39 deals with contributions and sets out what contribution should be paid and at what rate it should be paid; it also sets out how the wage period in relation to an employee is to be calculated.

5. Section 2(12) defines a "factory" to mean any premises whereupon 10 or more persons are employed or were employed for wages on any day "of the preceding 12 months". In the present case, the finding of the inspector was not that 10 or more persons were employed on the day on which he inspected it, but that on an earlier day, namely, 9-4-1966, 20 persons had been employed. It was therefore that the words "on any day of the preceding 12 months" assumed importance. There is no provision in the Act to which a our attention is drawn relating to the date upon the basis of which "the preceding 12 months" have to be calculated. It seems to us that the only possible answer to the question why this phrase was used is that it was intended to apply upon the date upon which the Act came into force. The Act when it came into force was intended to apply to those factories in which 10 or more persons were employed on that day or had been employed on any day in the preceding 12 months. By making such provision, the legislature meant to prevent escapement from the provisions of the Act. But this does not answer the question that is before us. T